The consumer slowdown may have already begun

“For some of these more vulnerable households, the impact of price increases will be mitigated to some extent by indexation of social assistance benefits twice a year, although short-term price increases will reduce recipients’ real incomes.”

Larger-than-expected declines in house or other asset prices would mean household spending could be even weaker than the RBA predicts.

“The magnitude of the decline in house prices due to higher interest rates is uncertain, especially given the high level of prices relative to incomes,” the RBA said.

Households call it back

While the RBA doesn’t predict consumption growth to slow into next year, internal data on credit and debit spending from the CBA shows total spending has fallen since mid-May, when the RBA began raising rates.

The RBA raised its target for the spot rate this week by another half a percentage point to 1.85 percent. Markets are praising the central bank by the end of the year to raise interest rates to 3.1 percent.

Spending on recreation, dining out and household items had all fallen in recent months, said Commonwealth Bank fellow economist Harry Ottley.

“For essential spending categories that are less price elastic, spending held up, while transportation, utilities and food all remained resilient,” Otley said.

“Transport spending has fallen slightly as fuel prices have fallen from recent highs, providing some relief to consumers.”

Mr Otley said the moderation in spending was expected given low consumer confidence.

“With spending on discretionary items already declining, it is likely that higher costs for mortgage holders will put more downward pressure on household consumption in the coming period,” he said.

Another sign that activity could be slowing is that the number of job openings fell for the second consecutive month in July, a SEEK report showed on Thursday.

There were tentative signs that labor demand could have peaked, NAB economist Taylor Nugent said. The fall in the number of vacancies was broad-based across all sectors, with the sharpest declines in the hospitality and tourism sectors.

“Two alternative explanations for the decline in new job openings could be that employers stop advertising new hires due to labor shortages, or that more migrants cross the international border, which could ease pressure in certain industries,” said Mr Nugent.

Despite the monthly declines, job openings remain at 60 percent above pre-pandemic levels.

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